The board of CIT Group Inc., one of the largest US lenders to small and midsize businesses, has approved a deal with major bondholders to keep the company out of bankruptcy, according to two people briefed on the talks. CIT will receive a rescue loan from key bondholders hoping to keep it alive long enough to restructure its debt, the sources said. The deal will not necessarily prevent a bankruptcy filing for the ailing firm, but will give it desperately needed breathing room while it attempts to refinance existing debt. CIT has a $1 billion payment due in August. Shares of CIT jumped 56 cents, or 80 percent, to $1.26 in afternoon trading Monday. The big commercial lender has faced a liquidity squeeze as its debt comes due and borrowers draw down their credit lines. The deal will give the company about $3b., according to published reports. CIT had been trying to reach a deal with the federal government for emergency funding before talks broke down last week. CIT had warned that depriving it of more federal aid could imperil about a million corporate borrowers. But the Obama administration turned down the company's request, showing it's drawing a line on federal rescues for troubled financial firms. A Treasury spokeswoman declined to comment on a possible private-sector rescue of the company, and would not say whether the government was involved in the negotiations. Once talks with government officials fell apart, CIT turned to some of its major bondholders for financial help. They struck a deal Sunday, after a weekend of marathon negotiations. The emergency loan would provide temporary financing to CIT so it could launch a debt exchange offer to free itself from upcoming debt maturities. Under the deal, CIT's main bondholders would give CIT $3b. at an initial interest rate of about 10.5%, according to a New York Times report. CIT's failure could pose a major threat to the economy, industry representatives have warned. A collapse of CIT could cut off financing just as businesses need it most during the ongoing recession. Its failure could force thousands of companies to drastically cut costs or shut down - driving up unemployment and dashing hopes for a swift economic recovery CIT serves as short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation. The National Retail Federation said in a statement that CIT's rescue "comes as a great relief to the many retailers who depend on this major lender for financing. As we have said from the beginning, CIT could not be allowed to fail at a time when retailers are already struggling to survive the national recession." Analysts say 60% of the apparel industry depends on CIT for financing, so other lenders taking up all the slack would pose a big financial strain.